Affordable Housing & Generational Ideals

Affordable housing is a growing problem in the United States that is unlikely to be solved without a radical reimagining of how we think about homes. What separates it from our other issues is that it is entirely artificial. That’s because one of the primary roadblocks preventing more affordable housing is existing homeowners.  

We live in an era of increasing urban migration [1] that creates direct conflicts for the single-family suburbs of the past. These population shifts strain communities near urban centers, generating resistance to expansion. It begs the question, are the economic advantages of one generation more critical than others’ access to economic opportunity? Do existing property owners have the right to exclude others from stable and affordable living?

I label the problem as artificial because it doesn’t have to exist. Affordable housing is a struggle of will, not resources. It’s a problem based on conflicting beliefs: one concept drawing from foundations of the past; the other demanding transformation to meet the needs of the present and future. Underlying these clashes is the larger class struggle. 

Achieving affordable housing requires us to let go of the idea that homes should tie to wealth building. It’s a shift that would free us from an inherited history that binds our hands to solve our present problems. But before we can do that, we need to understand better the people and ideas opposing the movement.

An Ugly Truth

What will be our philosophy of homeownership in the United States moving forward? Will we choose to keep the frameworks that we’ve been born into, or will we design something new that better fits the needs of people today?

We have to wrestle with the ideas of how we classify homes. Should we treat them as an economic engine or reshape it into a new type of asset given the economic, social, and cultural trends of today? There are a lot of benefits to owning a home, but consistently increasing costs are proving to make the goal unachievable for entire generations of people. 

In 2020 millennials are reaching a point where homeownership and family building are becoming a higher priority. Unfortunately for many, the prospect of purchasing a home is simply out of reach. High prices combined with existing school debts, remove the option of homeownership for large swaths of the next generation of buyers.  

Here we have to confront the ugly truth about home prices in the United States. Housing affordability is a problem caused by artificial constraints created by local municipality councils. Greed and misinformation support these economic decisions that reject the growing cultural awareness of a shared sense of well-being and prosperity for each other.

Understand that housing is a market-based institution in the United States. We consider housing to be an investment. Anytime anyone invests in something they hope to make a positive return over time. In other words, they purchase the home with the hope that they can sell it for more than they spent in the future.

Here we can identify the paradox created by restricting housing to the current market arrangements. Considering housing as an investment to make money off of is incompatible with the idea of affordable housing. It can be either affordable or an asset that increases its worth over time. It can’t be both.  

Consider another form of investment. Imagine you own a stock portfolio. The purpose of holding company stock is that you want the price to go up after you’ve bought it. Ideally, you will sell your shares for a dollar amount that is more than what you put into acquiring them.  

Language matters. When we label housing an investment, it reinforces a belief system in which the purpose of owning a home is to expect a return through sale or rent-seeking. If a home is an investment, it is no more valuable than shares of your favorite company. Your ultimate goal is for the value to increase to a point where you sell and retain a profit.

This is why affordable housing cannot exist within current market arrangements. This model of housing as an investment worked in the past because rapid expansion of new housing units kept the market well supplied and prices down. Today the housing market has yet to catch up with the expansion rates it experienced before the 2008 recession.

Considering housing an investment also supports a long history of structural racism in the United States. For example, a 2018 Harvard study [2] of the census [3] showed that 43 percent of black adults own homes compared to 72 percent of white adults. It’s unreasonable to call historical housing trends successful when the data demonstrates such clear bias along racial divides.

Two-thirds of renters in a Freddie Mac survey said that they could not afford a home, and saving for one is difficult given their current financial status [4]. Home prices are increasing at twice the rate of wage growth in the United States [5]. Today, more than 10% of U.S. households are spending at least half of their total income on housing costs [6]. It’s a vicious cycle trapping so many poor, middle-class, and younger American generations.

Approaching housing as an investment will always give the rich ways to discriminate against the poor. We can’t raise the floor for our most disenfranchised if we continue to support the system as it stands today.

The real problem with reforming housing is that the beliefs of men long dead bind our hands. Our laws of property and contract were established in our founding documents. But there is room for us to reject history’s domination of our future. The founding fathers were very clear that the right to self-determination was reserved exclusively for white male landowners. The intertwining of voting rights and property ownership laid the foundation for centuries of oppression that would take root in the form of racism, economics, criminal justice, and others. Property was and is power.  

The Not-In-My Generation

Classifying housing as an asset entrenches power in the hands of those who could take advantage of housing market conditions that were significantly more affordable than the present day. It also favors people with enough money to buy up homes during recessions and resell them at a higher rate when prices stabilize. In both scenarios, Millennials, Gen Z, and poor people of any generation suffer.

That is why the artificial problem of affordable housing centers on an unspoken generational conflict. Today the majority of real estate wealth is owned by people who are over 40 years old [7]. The boomer generation represents the most significant property holders, with millennials trailing far behind all ages.  

Homeowners tend to be older, wealthier, have deeper roots in their communities, and vote often. The majority of older generations are likely to resist change in policy, culture, and social norms. Locally they vote to protect their economic interests. That translates to ensuring that their homes, in many cases, their most substantial investments, are performing well.

Today the youngest boomer is 56. The oldest is 74. Their children have children, and many are looking forward to, or already enjoying retirement. With a life of relaxation on the horizon, it’s no surprise that many boomers are reentering the housing market looking to downsize their McMansion [8] for a more manageable home.

Millennial homebuyers are typically looking for the same thing. Today the two generations are competing in a battle to buy the same homes, except one has a significant economic head start. The result is price competition that inflates the prices of new homes pushing more millennial buyers out of the market. 

Census data indicates that as people live past the age of 35, their likelihood of owning a home dramatically increases. Real estate blogs often predict millennials will continue the trend. I’d bet those assumptions are mistaken. Massive student debt, tighter bank lending practices, urban migration, and a pattern of entering into long term marital commitments later in life are all economic factors stifling homeownership.

Addressing the affordable housing crisis requires that we deal with communities attempting to protect the value of their homes through zoning laws. Zoning laws are enacted by municipalities to restrict the uses of property in certain areas. This includes both commercial and residential properties. The rules intend to prevent new development and businesses from harming the community.  

In theory, municipal zoning laws are a good idea. The ability of communities to protect themselves from large corporations is an excellent thing. Let’s say Wal-Mart was trying to buy up open space to build another warehouse of low-quality goods. Communities have the right to deny them.

In practice, they can be abused to racially and economically discriminate. Most large American cities and their surrounding suburbs have housing regulations that limit the number and type of new housing units that can be built. The result is increasing demand that is met with inadequate supply for housing near and in the cities, raising rents. These practices disproportionately impact younger generations looking to build careers and the poor.

This economic divide has given rise to the cultural “Not in My Backyard” phenomenon, otherwise known as NIMBY. It’s the idea that while affordable housing may be useful, it’s not acceptable in our neighborhood.  

Common fears about affordable housing will bring drugs and crime to their neighborhoods. The reality is that they believe affordable housing will lower surrounding property values, reducing the resale value of their home assets. It’s a belief rooted in racism, classism, and otherness. Letting “those people” into our neighborhood will destroy our way of life and everything we’ve worked for.

New construction projects are built near other people. That’s what makes new affordable home construction useful. It gives more people access to opportunity. Efforts organized to restrict building new multi-residence buildings such as apartments, condos, and high-rise units are an attempt to stifle change for personal gain. 

As with many prejudices, the belief has little merit. Stanford University economics professor Rebecca Diamond researched the impacts that low-income housing construction had on nearby housing values [9]. Her research showed that home prices in middle-class neighborhoods that were very close to the new development slightly declined in value — about a 2.5% decline after ten years. Her research also demonstrated no decrease for houses a half a mile or more away from the affordable housing locations.

Trulia, a subdivision of the online real estate giant Zillow conducted a 2016 study [10] resulting in similar results to professor Diamond’s. They reviewed 3,083 low-income housing projects completed between 1996 and 2006 in the country’s 20 least-affordable markets to determine if the construction of affordable housing impacted the values of neighboring homes. The results concluded that with a few exceptions, the presence of low-income housing seems to have had no impact.

So why do these fears persist when they are demonstrably false? One reason is that they challenge a lifetime of indoctrination. To understand this, we need to think about the world that shaped the consciousness of the boomer generation.  

The parents of the boomers are labeled the greatest generation, and many of them grew up in extreme poverty and world war. The idea of self-actualization was secondary to survival as we might expect, and the values they believed and instilled in their children reflected these ideals. Life was a pure competition, and there were no safety nets to save you if you weren’t able to build wealth. 

There’s also the economic circumstances surrounding the development of the different generations. During and immediately after World War II, the United States experienced its most significant era of productivity and wealth building. This prosperity was fueled by progressive income tax rates for the wealthiest at over 90% [11]. Boomers benefited from substantial public investment in social programs, infrastructure, and technologies creating pathways towards prosperity for some. Ironically, these are many of the same policies the generation opposes today.

Opportunities in the 1950s and 1960s were primarily available to white male Americans. Black Americans, women, and other minorities faced extreme prejudice, much of which is still felt today. The boomer generation is imprinted with the consciousness of an age where discrimination was normalized, self-preservation was the ultimate ideal, and society was productive enough where even a low-skilled laborer could build wealth and prosperity over time. It’s no surprise that present-day boomers maintain these ideals, whether it be consciously or subconsciously is up for debate.

What the property holding boomers share with other ages is that they are a product of their experiences. The difference is that the cultural and empathic norms of our generations have deviated significantly from each other. The central philosophical conflict with affordable housing is a contest between empathy and economics.

Exclusion and self-determination directly conflict with the evolving ideals of plurality and cooperation that we observe today. It’s a problem central to many of the crises we face today, but one so often ignored despite the weight it bears. If we’re going to make real change, the kind that transforms our way of being, we need to address these ideological conflicts.  

Unfortunately, there seems to be little way out besides conflict. Generational holdouts are unlikely to embrace change, but that is a path to mutual disappointment. The generations that should be buying the high-priced single-family homes are unlikely to be able to afford them. What happens when your retirement is centered around an asset whose value deters future buyers?  

The immediate solution is to get involved in your local municipality. Zoning boards set these policies. Running for local office like a town council isn’t easy. But comparing it to other offices, it requires the lowest financial and time investment.  

Thinking long term, we want to develop and implement new laws of property and contract surrounding housing. Imagine two different types of property classes. Private homes would still exist as they do today, giving people who want to own something with more space and privacy an option to do so.  

The second class would be a more robust and attractive socialized housing offering. Forget the slumlord version of affordable housing so prevalent today, these units would provide diverse and dignified living spaces to people. Residents would never own the property but would be contractually obligated to make repairs. In exchange, rents and contributions could be subsidized federally.  

The idea is that if given the option, some people would choose to never own a home. There are plenty of nuances to work out, but these options allow us to customize our living experiences. Options could time-limited occupancy rates that cater to young professionals early in their careers. Others might be longer-term and community-centric. The possibilities are only limited by our imaginations.

The main reason to rethink affordable housing is that humanity will be better served when we stop believing that housing should be a revenue-generating asset. A safe and private space to exist is a vital part of self-actualization in modern American society. The generational ideals of the past are preventing us from becoming the humans we want to be in the present. In the end, it may take the dying of a generation to facilitate this change.   By exploring frameworks and ideas today we better prepare ourselves for the future opportunity.

[1] Urbanization and the Mass Movement of People to Cities by Brett Boyd Grey Line Group

[2] The State of the Nation’s Housing 2018 by The Joint Center for Housing Studies of Harvard University Harvard University 

[3] U.S. Census Table 22. Homeownership Rates by Race and Ethnicity of Householder: 1994 to 2016 

[4] More Renters Give Up on Buying a Home By Laura Kusisto April 2018 Wall Street Journal 

[5] Home prices are rising faster than wages in 80% of U.S. markets By Alcynna Lloyd     January, 2019 Housing Wire 

[6] The Neighborhoods Where Housing Costs Devour Budgets by David Montgomery April 4, 2019 City Lab 

[7] Older Buyers Near Pre-Recession Levels by Derick Moore August 13, 2018 U.S. Census 

[8] Boomers, Millennials, and the McMansions No One Wants By Christine Romero | Jun 7, 2017  

[9] Property value in low-income housing debate by Noel King Dec. 21, 2015 Marketplace 

[10] There Doesn’t Go the Neighborhood: Low-Income Housing Has No Impact on Nearby Home ValueBy Cheryl Young  November 16, 2016 Trulia [11] Income tax rates were 90 percent under Eisenhower, Sanders says By Joshua Gillin Nov. 15th, 2015 Politifact

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